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tv   Nightly Business Report  PBS  November 17, 2009 7:00pm-7:30pm EST

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>> paul: when it comes to bank of america's shotgun wedding to merrill lynch, congress is again debating who was pulling the trigger. some say it was bank of america; others blame regulators for pushing a deal at any cost.
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>> suzanne: with just a tiny increase in prices paid to factories, farmers, and other producers, the inflation picture remains tame, but could an uptick in prices be welcome news for the fed? we ask an economist. >> paul: general electric is getting ready to say so long to nbc-universal. a look tonight at why g.e. is making the move. >> suzanne: then, a big win for an american car maker. we'll tell you who took top honors in motortrend's car of year, and why that could push its sales even higher. >> paul: i'm paul kangas. >> suzanne: and i'm suzanne pratt. susie gharib is off tonight. this is "nightly business report" for tuesday, november 17. "nightly business report" is made possible by:
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this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> suzanne: good evening, everyone. in late december, it was a big deal. tonight there are still big questions about just how it happened. was bank of america forced into buying merrill lynch, or did the bank make the move on its own? as stephanie dhue explains, on capitol hill, the search is on for answers. >> reporter: democratic lawmakers painted bank of america as a tough guy, threatening to walk away to force more money from the government, as losses at merrill were piling up. committee chairman edolphus towns says bank of america fired general counsel tim mayopolous because he said the bank didn't have a legal reason to call off the deal. then, when bank of america
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threatened to cancel, regulators quickly came up with another $20 billion. >> the facts show that bank of america, one of the largest banks in the united states, was able to manipulate federal regulators to obtain billions of dollars in taxpayer money to help it go through with a deal it intended to do in any event. >> reporter: brian moynihan replaced mayopolous in the middle of the deal. moynihan says he believed the bank did have a case to call it off. >> when i came in to general council on december 14 or 15, we became aware that the losses had reached $18 billion, pretax. it was a different set of facts and circumstances. >> reporter: but republicans paint the scene differently. they think federal regulators pressured the bank to go through with the merrill buy. ranking republican darryl issa says the government's heavy hand kept bank of america from getting a better price. >> merrill lynch was not worth what you paid for it. had you been able to negotiate
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in december instead of in september, you would have been able to negotiate a much lower price. >> reporter: to add another angle to just how controversial the merrill deal was-- and still is-- even a bank of america board member seemed unsure about it. in january, charles gifford told his family in an email, "it was a bad decision." today he defended the deal. >> although it is fair to say i had a number of probing questions about the transaction at the start, i firmly believe that over the long haul, merrill lynch will continue to be an important contributor to bank of america's profitability. >> reporter: how the deal really went down may never be completely clear. but the prevailing story line will have an impact on how regulatory reform and the history books are written. stephanie dhue, "nightly business report," washington. >> suzanne: the name is different, but the mission is the same. the obama administration has replaced president bush's corporate fraud task force with a new "financial fraud enforcement task force." attorney general eric holder
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says much of the old group's work will continue, including dozens of probes into crime on wall street. but the new task force will also take on mortgage fraud and other financial crimes. >> the investigations that were under way continue. there are new investigations that have been launched, obviously can't talk about anything that is ongoing. but our focus is on all the places where we find or possibly can find fraud. whether it's on wall street, in the housing industry. the full breadth of those activities that led to at least in mart helped to bring about the financial criess that we are dealing with is the scope of this task force. >> suzanne: holder also weighed in on the government's recent loss in its case against two bear stearns hedge fund managers charged with fraud. he says the justice department is analyzing why a jury recently acquitted the men. >> paul: wall street retreated this morning on profit taking but didn't end that way.
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a weaker than expected .1% rise in october industrial production and a firmer dollar also prompted some of the selling. two hours into trading, the dow was off 27 points and the nasdaq down 10 points. the downturn was cushioned by a subdued .3% rise in october's wholesale prices. buyers jumped in after seeing how mild the market's pullback was, and that turned the major averages positive by the close. the dow ended up 30.46 at 10,437.42. the nasdaq gained 5.93 to 2203.78. the s&p 500 added 1.02 to 1110.32. in the bond market, the 10-year note rose 7/32 to 100 14/32, putting the yield at 3.32%.
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>> johning me now with more on the economy, money manager lincoln of the -- welcome to the program. >> thanks for having me. >> tomorrow we look at retail inflation. any chance we'll see any inflation signs in that report? >> if the ppi and housing numbers from today were a leading indicator i would suspect we won't see any uptick in the c. p. i. at all. the food and energy costs should leave us consensus plus two, but should leave us pretty flat on the number here. there's really no sign of aggregate demand across the consumer complex at the moment. so, no, i don't think that there's any sign of inflation here at the moment. >> so do you think that if we actually started to see inflation maybe not in tomorrow's report but in the near future that it could possibly be interpreted as a
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good sign for the fed and by the markets because it would be suggesting that we were seeing some increase in demand? >> remember that there's two kinds of inflation, one is monetary types of inflation, and is that being anticipated by the market and that's reflected in things like upticks in tips, prices and in the price of gold. the other is more consumer related, or demand related inflation and that's more reflected in the c. p. i. number and that would be a positive certainly in the fed's play book to allow them to take their foot off the gas pedal a little bit and begin to think about what their exit strategy is going to be in terms of cleaning up the massive amounts of liquidity that we've seen enter into the market over the last 18 months. >> how much inflation what level of inflation would you expect we would need to see before we would actually see the fed start to raise rates? >> you'd have to see a .5% x
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food and energy, it would have to be quite significant. and the sad fact is that despite the equity markets recent lefttation higher and higher, the real aggregate demand picture out there is really quite weak, and it was reflected both in chairman bernanke's comments yesterday in new york and vice chairman cone's comments later on in the evening that there's really not the chance for the public handoff into private demand. it's just not there yet. >> you raise the point of equity markets levitating. we certainly have seen the market on a tear here. what do you think is behind what we've been seeing in terms of the rally? >> yeah, so i think there's a couple of things here. first awful, as we enter the holiday season, you normally tend to see volumes dry up. and volumes throughout the fall actually have been quite low. when you have low volume trade,
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the price tends to move higher, just a dynamic of having, there are more natural buyers of equities than there are sellers. the second piece is, you know, there's a single trade out there right now and it is the short u.s. dollar trade. if that continues to play itself out here and we continue to see weakness in the u.s. dollar, you will see higher equity prices. then finally, most of this talk about money on the side lines, we think is really a little bit of fabrication. most of the institutional money managers that we know and talk to are fully invested and the last leg of somebody coming into this market is going to be the retail investor, of which we would caution them at these levels equities are quite pricey. >> all right. and you said when we spoke earlier today that you are worried right now that the market you think is dangerous. explain or elaborate for me, if you will, on that.
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>> sure. so the danger here is that markets like this that ten to trade on technical levels and when you have light volume and technicals driving markets they tend to have this melting upper fek. unfortunately, in the kind of economic environment that we're in, it doesn't really, to our mind, support the kind of multiple expansion that we've seen. in the past recessions you've had the dual tail winds of expanding credit and interest rates coming down. this time around we have exactly the opposite. we will have interest rates moving higher over the course of the next 12 to 18 months and you have seen a massive contraction, the largest contraction in consumer credit since world war ii, which really will crimp the consumer's ability to spend, and unfortunately sustain themselves. because, remember, there's one in ten or one in six depending on how you count it persons out of work that were highly dependent on that credit to patch them through these past
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recessions, and it's not going to be there this time and that puts is in a very precarious position. >> i okay, i think we have to leave it there. some very interesting thoughts, thank you for joining us. >> you bet. >> my guest, lincoln ellis at the lind group. >> paul: if the u.s. economy is on the path to recovery, at least one group of companies, u.s. homebuilders, see few reasons to be optimistic. the national association of homebuilders' latest survey shows most builders continue to see poor conditions in their industry. that comes as rising unemployment and home foreclosures add to the supply of unsold homes. economists say the government's expansion of the homebuyers' tax credit will help, but they think improvement in the sector will be slow. >> suzanne: that weakness in the housing market led consumers to put off do-it-yourself home improvement projects, and that led to a quarterly drop in profits for home depot. the home improvement retailer earned 41 cents a share in its fiscal third quarter, five cents
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higher than wall street was looking for. still, it was four cents lower than a year earlier. home depot says the housing market is still under pressure, but there are signs it's stabilizing. the company also slightly raised its full-year earnings forecast for 2009. >> paul: dotting the i's and crossing the t's is apparently all that's left tonight for negotiators working out a deal to sell comcast majority control of nbc-universal. nbc was once a jewel in g.e.'s crown, but as scott gurvey reports, that jewel has lost its luster. >> reporter: nbc was the prime motivation in 1986, when g.e. bought nbc's parent, r.c.a. the television network was a cash cow, sitting on top of the nielsen ratings, and with its owned stations throwing off tons of money. that came to an end with the explosion of cable tv and the internet. those are competitors for the eyeballs of consumers and alternate distribution channels for the programming nbc was
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creating at its great expense. nbc was a strange fit for industrial giant g.e., which prides itself on being first or second in its markets. analyst nicholas heymann says with cash no longer flowing and headaches mounting, g.e. decided to stop fighting the entertainment revolution. >> they've done a resourceful job figuring out how to mitigate that impact. i think the number one and number two is not necessarily the only reason. i think the structural change in the whole economics of the industry as you move from digital to analogue distribution and fragmented audiences was really... there just wasn't enough-- how do you call it-- gum to plug all the leaks in the dam. >> reporter: there is also a sense on wall street that the challenges faced at nbc- universal are distracting g.e. management. the firm also faces problems in its much larger energy, technology, and financial business segments. tuna amobi of standard and poor's says in the right hands, there is considerable value in n.b.c.-u. >> the new owners, whoever they
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turn out to be, could devote more resources and try to scale up the business and leverage some potential synergies, which up to now, arguably, g.e. investors don't seem to believe that g.e. has done to the potential that it could be executed. so i think this is what it comes down to. would comcast be a better owner of n.b.c.-u. compared to g.e., which is a non-media business? >> reporter: wall street gossip says g.e.'s decision on n.b.c.-u. is final. the rumors say if the comcast deal fails to come off, g.e. will spin a controlling stake in the n.b.c.-u. to the public by way of an i.p.o. scott gurvey, "nightly business report," new york. >> paul: there could be another deal in the works tonight. there's word that u.s. chocolate maker hershey and italian confectioner ferrero are considering a joint bid for cadbury. the move could help the british chocolate maker fight off kraft food's $16.7 billion hostile
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takeover bid. the "wall street journal" quotes sources as saying the talks between hershey and ferrero are preliminary and early in the >> suzanne: ford motors' new lineup of cars seems to be gaining traction. today the ford fusion and fusion hybrid were named "motor trend" magazine's "car of the year." the 2010 model beat a field of nearly two dozen contenders. the award is among the most prestigious in the automotive industry. it's sure to give ford a boost in promoting the sedan, you can expect a mention in future commercials. the fusion is already the tenth best-selling vehicle in america.
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fusion sales were up 15% in the first ten months of this year, despite a slump in overall car sales. paul? >> paul: suzanne, ford shares were among the most active on the big board today.
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>> paul: and those are the stocks in the news tonight. suzanne? telling the tax man they hold off shore accounts. most of those former tax cheats will likely avoid criminal prosecution as long
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as they now pay what they owe. the amnesty program usually has about 100 people each year disclosing those accounts, but this year the number swelled because the i.r.s. reached a land mark agreement with the swiss government, handing over thousands of names tied to previously secret bank accounts >> paul: tomorrow, are online brokers the big winner in the market run-up? we ask t.d. ameritrade's c.e.o. as we go one on one with fred tomczyk. >> suzanne: kenneth jacobs now has the top job at independent investment bank lazard. he succeeds bruce wasserstein, as chairman and c.e.o. wasserstein died last month. jacobs was chosen unanimously by lazard's board, and says he looks forward to continuing wasserstein's strategy. jacobs has been with lazard for more than two decades. most recently, he headed up its north american business. >> paul: the government is cracking down on phony treatments for the swine flu. the federal trade commission sent warning letters to ten web sites.
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those sites sold everything from diet supplements to air filtration devices, and claimed their products could treat or cure swine flu. the f.t.c. says the only products recommended for treatment of h1n1 flu are prescription anti-viral drugs, like tamiflu and relenza.
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>> suzanne: here's a look at what's happening tomorrow. we'll see consumer prices and housing starts, and also, quarterly results from bj's wholesale club, limited brands, and petsmart. tonight's commentator says when it comes to commodities, we literally have a lot to learn. he's todd buchholz, author of "new ideas from dead c.e.o.'s." >> whenever oil prices shudder, washington blames energy traders. meanwhile, pundits warn of peak oil. they say the earth is running out of dead dinosaurs. we cannot drill our way out of the mess, says t. boone pickens. he turned in his oil drill-bit for a flock of windmills. since higher oil prices coincide with climbing sugar and cocoa prices, why don't peak oil pundits stretch their argument to all commodities? they may not believe the world is flat, but they do seem to think the earth is hollow. in fact, the stumbling block is not geologic; it is not even environmental. it is a lack of talent. we are not suffering from peak
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oil; we're suffering from peak people. the u.s. graduates only 10% as many petroleum engineers as it did 25 years ago. west virginia faces a shortage of coal miners because the coal miner's daughter doesn't want to strap on a headlamp. during the 2008 oil price spike, foundries in houston struggled to find machinists who could handle pipes without tripping into the gears like charlie chaplin in "modern times." last year, tortilla and rice riots raged across the globe, and yet we have no more agricultural scientists than we did ten years ago. colleges could help by launching commodity majors not in make-a- quick-buck speculation, but in figuring out how to get more stuff out of the ground. today in the u.s., we have more dance choreographers than metal- casters. that makes it easy to put on a high-kicking production of "oklahoma," but a lot tougher to erect an oil rig in tulsa. i'm todd buchholz. >> paul: recapping today's
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market action, stocks lose ground early on, but make a closing comeback. the dow gained 30 points and the nasdaq added nearly 6 points. to learn more about the stories in tonight's broadcast, and to read jeff brown's blog on just how much money you really need for retirement, go to "nightly business report" on you can also email us at >> suzanne: and lly tonight, the city of austin, texas, is taking on congestion-- not the kind that comes with cold and flu, but the kind that clogs our streets. austin is working with car-2-go, a car-sharing service based in europe, to test a car sharing program with city employees. the city says if the tiny blue and white smart cars are a hit with its workers, it could roll out the plan to residents. the fleet of 200 smart cars began driving around austin today. the pilot program is expected to last about half a year, paul. paul, have you ever ridden in one of those cute little smart cars? >> no, i haven't, i just hope
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the drivers are as smart as the cars. >> absolutely. that's "nightly business report" for tuesday, november 17. i'm suzanne pratt. good night, everyone, and good night to you, paul. >> paul: good night, suzanne. i'm paul kangas, wishing all of you the best of good buys. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you.
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captioning sponsored by wpbt captioned by media access group at wgbh
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